Kiwi Falls to Lowest Level This Year

15 May 2012

The New Zealand dollar dropped below to it lowest level this year against the greenback after milk prices posted another sharp drop at Fonterra’s latest dairy auction and on reports Greeks will be heading back to the polls.

The kiwi recently traded at US76.88 cents down from US77.72c at 5pm yesterday, a level last seen on December 30.

Meanwhile on the Trade Weighted Index of major trading partners’ currencies it was last at 70.17 little changed from 70.20 yesterday.

The kiwi’s move lower started in the offshore session after Greece announced it will hold a fresh election in June after several attempts at forming a pro-euro zone coalition government failed.

The announcement was widely seen as a negative amid speculation the heavily indebted country is likely to exit the euro zone. German Finance Minister Wolfgang went so far as to call the vote an effective referendum on Greece’s euro membership.

The New Zealand dollar dropped below to it lowest level this year against the greenback after milk prices posted another sharp drop at Fonterra’s latest dairy auction and on reports Greeks will be heading back to the polls.

The kiwi recently traded at US76.88 cents down from US77.72c at 5pm yesterday, a level last seen on December 30.

Meanwhile on the Trade Weighted Index of major trading partners’ currencies it was last at 70.17 little changed from 70.20 yesterday.

The kiwi’s move lower started in the offshore session after Greece announced it will hold a fresh election in June after several attempts at forming a pro-euro zone coalition government failed.

The announcement was widely seen as a negative amid speculation the heavily indebted country is likely to exit the euro zone. German Finance Minister Wolfgang went so far as to call the vote an effective referendum on Greece’s euro membership.

That saw equities on both sides of the Atlantic extend their losses as investors sought to trim their exposure to riskier assets. On Wall Street, the Standard & Poor’s 500 Index fell 0.6 per cent to 1330.66 in afternoon trade, while in Europe the Stoxx 600 Index closed 0.7 per cent lower at 245.76.

“Euro zone politics will remain a market focus for a few more weeks, the forthcoming Greek elections extending the period of uncertainty with risk-averse implications,” said Imre Speizer, a market strategist at Westpac.

The kiwi and Australian dollar are considered risk currencies as they are strongly correlated to global investors’ appetite for higher yielding assets.

Adding momentum to the currency’s decline, milk prices posted another notable decline at Fonterra’s latest milk powder auction. The GDT-TWI Price Index fell 6.4 per cent versus two weeks ago, and marks the third straight decline in a row. The average winning price was US$2618 a metric tonne, the lowest since August 2009.

On the crosses, the kiwi was recently trading at 77.39 Australian cents, down from A77.93c at 5pm yesterday, and it fell to 61.70 Japanese yen from 62.12 yen. It fell to 60.38 euro cents from 60.63 euro cents, and dropped to 48.04 pence from 48.33 pence.

The kiwi may trade between a range of US76.80c and US77.40c, according to an ANZ report, with further volatility in store as the Greek crisis continues.